A new tax reverse charge may change the way you account for VAT. As of 1 October 2020, a new domestic VAT reverse charge will take effect in order to reduce the prospect of trader fraud.
Specified services (similar to those under the Construction Industry Scheme (CIS) and materials that are treated as part of the supply of construction services during construction will be subject to the new reverse charge which sees responsibility transfer from the sub-contractor onto the contractor for accounting to HMRC for value added tax. However, there are some services that will be exempt.
Importantly, the new reverse charge carries some risks that need to be considered, such as cash flow impacts, project restructuring, administration issues for invoicing and payments, and risk management. It’s worth noting that while the change will affect all specified services and materials from 1 October 2020, this also includes those provided under pre-existing contracts.
Sound complicated? It is. You need to ensure you’re prepared in advance of this change; we can help you do that.
Take a look at insights from our experts below.